Spain prepares for government at last
Opposition Socialists agree to end 10-month political impasse and let Rajoy rule
Caretaker Prime Minister Mariano Rajoy welcomed the imminent formation of a new Spanish government, after the opposition Socialists agreed to end a 10-month political impasse and let him rule for a second term.
As a result, Spanish government bonds rose.
King Felipe began two days of consultations with party leaders in Madrid yesterday, the start of a process that should see Rajoy’s People’s Party back in power within days. A first confidence vote may go ahead on October 27 with a second round in which Socialists abstain taking place two days later.
“Soon we will have a government that is open to dialogue and understanding, that will uphold the law and make sure it’s upheld,” said Rajoy in a speech in the capital.
Spanish 10-year debt yields fell to the lowest level in more than a week, dropping three basis points to 1.08 per cent as of 10.24am in Madrid. Stocks rose with the benchmark IBEX 35 index gaining 1.3 per cent led by banks including Banco Popular Espanol and Banco Bilbao Vizcaya Argentaria.
Rajoy is emerging Spain’s unprecedented from deadlock with his grip on the government confirmed despite questions over how he would be able to take the country forward. He’s set to govern in a minority with just 137 deputies in the 350-seat parliament and his rivals have already demonstrated their willingness to vote together against the PP.
“Given the highly fragmented Parliament, the government is likely to struggle with further reforms and even with the passage of the 2017 budget,” Apolline Menut and Antonio Garcia Pascual, economists at Barclays Bank Plc in London, said in a research note yesterday.
Confidence vote
The Socialist federal committee voted on Sunday that the party’s 85 lawmakers should abstain in a confidence vote this week to let Rajoy form a government, caretaker party leader Javier Fernandez said in a televised press conference on Sunday. All the group’s lawmakers should abstain with the aim of “unblocking the exceptional situation,” said Fernandez. Rajoy applauded the Socialist decision, describing it as “important” and “reasonable.”